Los Angeles City Council voted to draft a policy that would ban cashless retail businesses in the city.
According to Councilmember Heather Hutt, cashless businesses could negatively impact many of L.A.’s residents who are already outside of the traditional banking system. Hutt told Laist that there are residents that don’t have access to credit and aren’t able to open a bank account.
Hutt noted that specifically, immigrants, seniors, low-income communities of color, and young people are often at a disadvantage and are either below the legal age to apply for a credit or debit card, or simply don’t have the same financial inclusion opportunities that others do.
Financial Inclusion Challenges
Much has been written about the importance of financial inclusion and how technology could be the key to getting there. But is technology really helping?
Digital wallets are increasingly growing in popularity among the unbanked in Latin America. Although this may be one answer to financial inclusion, it requires the user to have a bank account, debit or credit card.
Furthermore, with many organizations moving towards mobile and online banking services, recent closures of banks are certainly not making financial inclusion any easier for unbanked consumers. According to Which?, a UK-based consumer advocacy organization, 5,600 bank branches have shut their doors since January 2015.
Fintech companies may have been quick in seeing a significant opportunity with more consumers adopting cashless payments by creating payment solutions that would meet this growing demand. But they may have also overlooked consumers who aren’t ready to part with cash payment methods.
Essentially, Los Angeles City Council is ensuring that the playing field for all consumers is even, and those that still heavily rely on cash aren’t turned away.
“Moving one step closer to cashless transactions protects merchants’ earnings and helps move along payment transactions so people do not fumble with cash,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research.
“In a city like Los Angeles, where the LAPD reported a 42% increase in personal and other theft and a 13.9% increase in burglary, there really is no good reason to carry cash. These days, if you want a bank account, it does not take much effort to get one.”
“Next time I’m in LA, I will still go to Pinks for a Brando Hot Dog, with nothing in my pocket but my Mastercard and Visa,” he said.
